00:00Bloomberg intelligence semiconductor analyst Jake Silverman. I mean this is something Matt and I have been talking about nonstop Jake.
00:06The fact that you can have this massive run up in this company and it still trades at under 10
00:10times forward earnings. Why does it seem so undervalued relative to where even some of the other chip stocks are.
00:17Yes. So historically the memory market has been very cyclical. So when you compare a company like micron where they
00:25generate lots of free cash flow during up cycles but then also burn lots of free cash
00:29flow during the downturns you tend to get these lower multiples. So historically when you compare these companies it's almost
00:36difficult to compare them on something like price to earnings. So typically we've seen things like EV to sales or
00:42price to book. But now I think what you're seeing in the fact that the company is getting value at
00:47a trillion dollars isn't just the free cash flow generation but it's a question around potentially re-rating the multiple
00:52of this company. Is memory still as cyclical as we've seen in the past or are we seeing structural difference
00:59differences because of AI. So I mean the key here is that it's not just the P that's gaining but
01:06the E that is just shot up and that shows how much pricing power these companies have and I just
01:14wonder how long they keep that because at some point you know people who are making other stuff are saying
01:21like wait why don't we make high bandwidth DRAM instead.
01:23Yeah we expect pricing to decelerate although I think for a lot of their customers that pricing deceleration still means
01:31it's going to impact their cost of goods by quite a bit and it's going to have an impact on
01:36the amount of memories.
01:37The amount of capex spent on memory is still going to increase but yeah at a certain point they can't
01:43keep increasing the pricing at the rate that it's been growing.
01:47It's going to decelerate but because there hasn't been a fair under investment in capacity over the last few years
01:54because of the last downturn there's still a structural under supply.
01:59And so if we think about the next I would say 12 to 18 months maybe even 24 months there's
02:05still likely to be a supply and demand imbalance assuming that AI demand continues at the pace that it's at.
02:12So it's not just Micron that's now over one trillion dollars it's also SK Hynix gaining more than a thousand
02:18percent in the past 12 months.
02:20The cost fee is up 98 percent. What about the South Korean chip makers because there's also been a lot
02:26of retail participation in that market.
02:28How much are they genuinely growing versus hype over them over again SK Hynix even Samsung's of the world.
02:34I think when you look at the different memory makers they're all really benefiting from the same trends.
02:39It's pretty much a rising tide lifts all boats. I think Samsung now I know you asked more about SK
02:44Hynix.
02:44I'll get to them in a second. But Samsung specifically they were kind of a laggard for a bit with
02:49high bandwidth memory.
02:50It seems like they are catching ground now again.
02:53And so when you think about SK Hynix they've been the leader in high bandwidth memory.
02:57But actually the real driver has just been general DRAM and NAND pricing.
03:01So not even specifically just AI specific chips but really the pricing environment around all of their memory related products.
03:08So SK Hynix, Samsung, even SanDisk they're all competitors to Micron but they're all benefiting from the exact same trends.
03:16And really at the end of the day it's pricing primarily driven by AI related demand with capacity that just
03:22is lagging.
03:23Because there isn't enough lead time to actually develop these fabs in the time that all these investments need for
03:29AI.
03:29Have you noticed a change in the way people react to you at cocktail parties over the past couple of
03:38years as a semiconductor analyst?
03:40I get a lot of questions about AI as you can expect but a lot about memory as well.
03:45And I think a lot of folks focus a lot on the price of the memory that they're going to
03:50use for their PC or something like that.
03:53And also I have gotten questions about whether smartphone pricing is going to go up.
03:58But Apple seems to be a little bit less inclined to increase their pricing.
04:02So from a consumer perspective.
04:03How much higher could it go dude?
04:05We'll see.
04:06I don't know yet.
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